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Adobe to acquire Macromedia for $3.4 billion

updated 06:15 am EDT, Mon April 18, 2005

Adobe to buy Macromedia

Adobe Systems today announced a definitive agreement in an all-stock transaction valued at approximately $3.4 billion. "The combination of Adobe and Macromedia will provide customers a more powerful set of solutions for creating, managing and delivering compelling content and experiences across multiple operating systems, devices and media. Together, the two companies will meet a wider set of customer needs and have a significantly greater opportunity to grow into new markets, particularly in the mobile and enterprise segments." [updated with conference call notes]

"Customers are calling for integrated software solutions that enable them to create, manage and deliver a wide range of compelling content and applications -- from documents and images to audio and video," said Bruce Chizen, chief executive officer of Adobe. "By combining our powerful development, authoring and collaboration software -- along with the complementary functionality of PDF and Flash -- Adobe has the opportunity to bring this vision to life with an industry-defining technology platform."

Under the terms of the agreement, which has been approved by both boards of directors, Macromedia stockholders will receive, at a fixed exchange ratio, 0.69 shares of Adobe common stock for every share of Macromedia common stock in a tax-free exchange. Based on Adobe's and Macromedia's closing prices on Friday, April 15, 2005, this represents a price of $41.86 per share of Macromedia common stock. Upon the close of the transaction, Macromedia stockholders will own approximately 18 percent of the combined company on a pro forma basis.

In the combined company, Chizen will continue as chief executive officer and Shantanu Narayen will remain president and chief operating officer. Stephen Elop, president and chief executive officer of Macromedia, will join Adobe as president of worldwide field operations. Murray Demo will remain executive vice president and chief financial officer. Dr. John Warnock and Dr. Charles Geschke will remain as co-chairmen of the Board of Directors of the combined company and Rob Burgess, chairman of the Macromedia Board of Directors, will join the Adobe Board.

"Both Macromedia and Adobe are passionate about creating and enabling great experiences across a wide range of devices and operating systems," said Elop. "Our combined teams will be a powerful force for innovation around cutting-edge platforms for delivering content and applications."

"While we anticipate the integration team will identify opportunities for cost savings by the time the acquisition closes, the primary motivation for the two companies' joining is to continue to expand and grow our business into new markets," said Chizen.

The acquisition, which is expected to close in Fall 2005, is subject to customary closing conditions, including approval by the stockholders of both companies and regulatory approvals. The transaction will be accounted for under purchase accounting rules. Following approval, Adobe said it would begin a 12-month stock repurchase initiative worth $1 billion, which would further bring value to shareholders. Adobe also said the purchase of Macromedia, if approved, would neutral-to-slightly accretive for the first twelve months before the stock buy back.

The companies said that the new company would leverage the Adobe corporate brand but retain each of the Macromedia product brands. It said that the Macromedia's current San Francisco office would remain an in important and substantial location for the new company's operations, but it did expect some layoffs as parts of the businesses were consolidated. Touting the purchase a "growth play" (vs. pure consolidation within the industry), Adobe said it anticipated that the acquisition would allow the combined company to grow faster than both of the companies alone.

Adobe also expected that it would not encounter any regulatory issues, citing both open-source programs and CorelDraw--particlarly in the German market--as substantial competitors. Adobe also said the products offered by both companies were complimentary and offered a different set of tools for developers (Macromedia Studio) and designers (Adobe Creative Suite).

 
Previous Comments

Never saw that coming!

04/18, 06:22am reply

:eek:

yikes600

Forum Regular

Joined: Sep 2004

0

Anti-competitive?

04/18, 06:45am reply

Surely this is anti-competitive - their product portfolios overlap hugely?

Frogmella

Fresh-Faced Recruit

Joined: Sep 2001

0

Freehand

04/18, 06:53am reply

Hey! this is a good chance to replace a dragon called illustrator with a rocket! Freehand rules!

Bitnuke

Fresh-Faced Recruit

Joined: Aug 2004

0

Ouch !

04/18, 06:53am reply

This is bad news. I hope Dreamweaver will stay - I don't quite see myself using Golive. Flash should be kept for sure. But I fear for FireWorks and to some extend FreeHand.
This is quite typical of Adobe : a huge company unable to come up with decent products (well, very often) so they have no other solution but to buy other companies and their products.

HeatherEcsedi

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Joined: Oct 2001

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Director

04/18, 06:58am reply

I don't know if this fusion is bad or good.
Surely bad for competition, but for the products ?

I hope that Director (that was quite the primary focus of Macromedia since Flash) will get a better treatment from Adobe since it's a VERY powerfull software.

Can you please Adobe, make the shockwave Director plugin far more widespread than now, and even adapt it on the linux platform ?
That will make sens to this acquisition and expand your presence in the multimedia area and your competence catalog.

nicomac

Fresh-Faced Recruit

Joined: Apr 2005

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NooOoOOoooOoO!!!

04/18, 07:04am reply

Man, oh man. I really didn't see this coming. Macromedia was/is doing so well, coming out with products that are far more intuitive than Adobe. I am a web designer, and GoLive just doesn't cut it compared to Dreamweaver. But no matter who designs better software, their competition definitely created innovation between them. I hope there is some SEC sort of board to declare this anti-competitive. Adobe will have a stronghold on the market.

Zkatz007

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Joined: May 1999

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Eh?

04/18, 07:22am reply

You know, if this had been posted two weeks ago, I would've sworn it was an April Fools joke. That said, all I can think is:

"nooooooooooo!"

dystopia

Fresh-Faced Recruit

Joined: Sep 2004

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Wow

04/18, 07:25am reply

What this says to me is that GoLive is done for and Freehand is done for. What will they do with all of this stuff now that Tiger is ready to ship?????

sfstlo

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Joined: Sep 2002

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hmm.

04/18, 07:29am reply

finally! an end to the inane Macromedia-style timeline! everytime i use Flash i would hope and pray for an After Effects style timeline. (and LiveMotion was never a realistic Flash competitor)... though i doubt both Director *and* Flash would switch to AE style timelines as Director nerds would go mad as they love the timeline so much and like to make out with it and marry it or whatever.

i actually like Illustrator a lot more than Freehand. mostly because i never give Freehand a shot and the tools are a bit odd for a long time Illustrator user. a combining of the tools might be good though. that and Freehand on OS X was slower than dirt and crashtastic compared to Illustrator. at least the last time i tried. 10? pre-MX?

same goes for Dreamweaver/GoLive... our web people swear by Dreamweaver... but personally i like GoLive. i can't see killing one or the other off completely. nor keeping both around.

maybe Contribute will become the reincarnation of PageMill.

no idea what Director will become. i can't imagine them killing it off though. it still has a pretty big corporate / education presence does it not?

Fireworks makes zero sense to keep around.

all in all it seems sort of a good thing... sort of a bad thing. as i have no idea how they will end up combining/deleting redundant products and am somewhat concerned about the lack of *major* competitors to adobe after this.

010111

Junior Member

Joined: Aug 2002

0

Adobe

04/18, 07:33am reply

The company is a PITA. Can't Apple just buy the joint and be done with it?

While they're at it, they could drop the Win versions and ensure the Mac stays the platform for content creators.

Simon

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Joined: Nov 2000

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